Summary: In this article, you will learn how to do a real estate market analysis. Topics include: what is a real estate market analysis also called a comparative market analysis, why they’re important for buyers and sellers, and a simple step-by-step guide to determine a property’s accurate market value.
Introduction
If you have ever bought or sold a home, chances are you know a thing or two about figuring out the value of a property. If the asking price is too high, the likelihood of the home being sold greatly decreases. On the other hand, if a home you are looking to sell is priced too low, you’ll miss out on potential profits.
To make sure a home is fairly priced, a real estate market analysis should always be performed, before buying or selling. This analysis will compare the values of similar homes in the area to come up with an accurate market price. Before we get into how to do a real estate market analysis, let’s start with defining what it is.
What is a Real Estate Market Analysis?
A real estate market analysis is often called a comparative market analysis (CMA). It’s basically an analysis of the current market values of properties, comparable to a property you are looking to buy or sell. A CMA is a helpful tool to determine the market value of your own property, especially if you are trying to decide an accurate selling price prior to listing.
Something important to note is that a real estate market analysis is different than an appraised value, which is determined by a professional appraiser. A comparable market analysis is considered subjective and gives the seller information on the value of similar houses in the area. While there are many factors to take into account when performing a real estate market analysis, it is completely manageable with an organized approach.
Your real estate agent may conduct a CMA for you to determine what price to list when selling or a price to offer when buying a home. Because no two properties are exactly the same, adjustments must be made to account for differences.
Why Should I Do a Real Estate Market Analysis?
You should always do a real estate market analysis, whether you are buying or selling a property and I’ll explain why. This analysis will help you understand the current housing market, how much properties similar to yours are worth, and if it’s an investment property, how much you can charge for rent.
The information gathered through a real estate market analysis or CMA helps the seller choose a listing price and helps buyers see if the asking price is too high, low or reasonable. A CMA should always be conducted to make sure both buyers and sellers are getting a fair deal, based on the value of the property.
By comparing similar properties on the market, you will be able to accurately put a price on a home.
How to Do a Real Estate Market Analysis - 7 Steps
Step 1 - Property Analysis
The first step in your real estate market analysis is to perform an analysis of the property. The following characteristics should be evaluated:
- Area and neighborhood: Drive around the neighborhood the property is located to assess the quality. If you are looking at an out-of-state property, utilize online resources like, Google Street View to see which streets or pockets are nicer than others. Keep in mind that Google’s images may be out of date, so it may be difficult to determine how nice the neighborhood actually is.
- Size or square footage.
- Lot size.
- Number of bedrooms and bathrooms: The number of bedrooms and bathrooms is extremely important when determining the value of a home. For instance, two-bedrooms are less favorable than three or more. And homes with only one bath often sell for a lower value.
- Other rooms: Because homes with more bedrooms generally mean a higher price, it’s a good idea to see if rooms that may have been used as an office or den would qualify as a bedroom. Check out local building codes to ensure other rooms can legally be classified as bedrooms.
- Number of floors.
- Construction age: When the house was built, remodeled, added onto, etc., plays an impact on valuation of the property. Newer homes will be valued higher unless maintaining the antiquity or original architecture of an old home is considered desirable in the area.
- Amenities and features: Several amenities and features that may increase the property’s value include, a fireplace, deck, garden, swimming pool, balcony, etc. Other amenities could be that the house is located in a gated community with a clubhouse or access to tennis courts. All of these variables impact the value of the home.
- Proximity to local amenities: Consider if a property is located or near a busy road, if it has quick freeway access, if it’s close to stores, public transportation, parks, schools, etc. Additionally, look to see if a property is in close proximity to undesirable sites like a garbage dump or industrial buildings.
- Recent or notable improvements.
Step 2 - Assess the Original Listing Price
Once you’ve done the property analysis, look online for the original listing, if possible. This will give you a good idea of the general condition of the home. Go through the photos and descriptions for any upgrades, remodels or potential issues. The builder or developer should also be listed so you can determine if it was custom built or cookie-cutter home.
Step 3 - Check Property Value Estimates
Utilize online resources like Zillow Zestimates to give you the estimated market value of the home. As these are market value estimates, they may not be totally accurate, especially if changes have been made to the home. But this will provide a good starting number to go off of as you continue your real estate market analysis.
Step 4 - Search Comps
The next step is to search for properties that are comparable to yours. Comparable properties should have the same number of bedrooms and bathrooms, within 300 square feet in size, located in the same neighborhood, similar lot size, age of home and features.
Identify Recently Sold Properties in the Area
By looking up sold listings online, you will be able to see exactly how much similar homes sold for in the area. Look at past listings within a radius of one to three miles from your property. Search for homes that were sold in the last three months, as this will give you the most accurate value as market trends fluctuate. Then, if necessary, expand your search to the last six months. Pick three to five comparable properties and add them to your list of comps.
Search for Current Listings of Comparable Homes
Next, look for current listings of comparable homes within a one to three mile radius. Choose three homes, at minimum, that are comparable to yours. Keep in mind that these listing prices are not necessarily real values. Typically, a sellers’ market tries to inflate values by pricing higher, while a buyers’ market tries to deflate values with lower prices. The value of unsold homes is impacted by real estate trends. Current listings will give you a good idea of what your competition is like.
Consider Pending Listings of Comparable Homes
Pending listings have not fully closed yet, however, looking at these listings will give you real time insight into how the market is doing.
Look at Expired Listings of Comparable Homes
The last thing you’ll want to look at is expired listings of similar homes. This is extremely valuable information for your market
analysis because usually properties that have expired were priced too high.
Sources to Gather Real Estate Analytics
You might be asking yourself, where do I find all of the information I need for my comparative market analysis? The following are good resources to find the analytics you need:
- The Federal Housing Finance Agency (FHFA). This website has data on recently sold properties within specific regions.
- The FNC Residential Price Index. Data from more than 20 metropolitan areas that are based on home appraisals. This index also helps buyers and sellers understand current market trends.
- Real Estate Websites. Popular websites like, Zillow, Trulia, and Redfin are great for checking prices of active listings or recently sold properties.
Step 5 - Determine a Price Range
Now that you have compiled a list of all the necessary information, it’s time to determine a price range for your property.
Set Your Ceiling Value
Choose one property from the three to five comps you found, that is definitely worth more than yours. The property may be on a better street, offers more features or is newer. This number will be your ceiling value – or at the top of your price range.
Set Your Floor Price
Then pick a property that is definitely worth less than yours. Maybe it is located on a busy street, has fewer features, or less desirable curb appeal. This number will be your floor price – or the bottom of your price range.
Step 6 - Assess the Home in Person
There is no better way to accurately price a home than to assess it in person, if possible. When walking through the property, take note of factors that will impact value, such as: overall condition, any additions or upgrades, amenities, features, necessary upgrades or repairs, as well as the exterior and landscaping.
Step 7 - Decide the Market Value
Based on all your research, you should have a price range for what your property is worth. Take into account everything you observed while walking through the home and how it will impact the value. Then, take the selling prices of the comparable homes on your list, divide that price by their square footage, and get the price per square foot for each home. Once you have calculated the average price per square foot of your comps, multiply that by the square footage of the home you are trying to sell or buy.
Finally, decide where your property falls within the established price range. This number is the market value of your home.
Example of Calculating Average Price From Comps
Here’s an example of a comparable market analysis (CMA) to help you determine average prices from comparable listings.
Let’s say your property is 2,500 square feet and after researching you have five comparable homes:
- Home one: 2,700 square feet and sold for $490,000 (price per square foot: $181)
- Home two: 3,000 square feet and sold for $510,000 (price per square foot: $170)
- Home three: 2,200 square feet and sold for $455,000 (price per square foot: $206)
- Home four: 2,400 square feet and sold for $475,000 (price per square foot: $197)
- Home five: 2,650 square feet and sold for $485,000 (price per square foot: $183)
The average price per square foot of these five comparable homes is $187.40. Then multiply your property’s square footage (2,500) by the average price per square foot ($187.40), giving an approximate home value of $468,500. This is a pretty accurate estimate of how your home should be priced.
Final Thoughts
Figuring out how to do a real estate market analysis on your own may seem like a daunting task. However, by following our step-by-step guide, you will be able to determine an accurate home price for any real estate endeavor.
If you are a seller, conduct a real estate market analysis to ensure you aren’t overpricing your home. Overpricing leads to expired listings and loss of freshness on the market. The longer your home is on the market, the more money you’re likely to lose. Alternatively, pricing your property too low will result in missing out on potential profits. Utilize free online tools to come up with the most accurate market price for your home.
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